Buying a Dental Practice — The Complete Camp

Collections is the headline number. A general practice producing $1M/year in collections is roughly comparable to another producing $1M — but only if you look beneath. Start here:

TREND: Three years of tax returns. Are collections flat, growing, or declining? A declining practice that 'just needs marketing' is a risk the seller is pricing into you, not into the asking price. Demand the trend before the total.

SDE (Seller's Discretionary Earnings): This is what you actually buy. SDE = net profit + owner's salary + personal add-backs (owner health insurance, car, phone, retirement contributions, depreciation, one-time expenses, and any non-market salaries). A practice grossing $800K might show $40K net on a tax return but have SDE of $280K after proper add-backs. The EBITDA multiple — typically 2.5×–3.5× for a healthy general practice — is applied to SDE, not collections.

What tax returns hide: sellers legitimately run personal expenses through the practice to reduce taxable income. Those add-backs are real and appropriate — but you must document each one in an add-back schedule during due diligence. The flip side: revenue a seller ran off the books doesn't count unless verifiable. Only audited or bank-statement-verified cash flow goes in the denominator.

Collection rate: Production ≠ collection. A practice producing $1.2M but collecting $1.0M has a 83% collection rate — meaning it's writing off $200K/year in uncollected balances. Healthy is 95%+. Below 90% is a systemic billing problem you will inherit.

Accounts receivable (AR): Healthy AR is roughly 1.0× one month's production, with ≤20% aged over 60 days. Bloated AR — especially with heavy 90+ day balances — signals the front desk has been financing patients for free. You're buying that habit.

Active patient count: 'Active' means seen in the last 12–18 months. Insist on this definition, not the database total. A practice with 3,000 'patients' but only 900 active patients is priced wrong.

New patients per month: 20+ per month is healthy for a general practice. Under 15 and you'll need to inject marketing budget to maintain revenue.

Here is the actual sequence, with realistic durations:

SEARCH (weeks to months): Search confidential listings, sign NDAs to see financials, tour after hours. Work with a dental-specific broker or buyer advocate who has access to off-market deals.

LETTER OF INTENT (LOI): A non-binding written offer — price, structure, due-diligence period, and key terms. Spend time on the LOI. Terms you fail to nail here are nearly impossible to win back later. Standard items: purchase price, allocation (how the price is split among equipment, goodwill, and non-compete), due-diligence period (30–60 days), and post-closing transition requirements (4–6 weeks of seller availability).

DUE DILIGENCE (30–60 days): Verify everything in the financial picture. See the full checklist below.

FINANCING APPROVAL (30–90 days): Conventional dental lenders: 30–45 days. SBA 7(a): 60–90 days. This clock runs parallel to due diligence — start the loan application the moment the LOI is signed.

LEASE ASSIGNMENT (6–10 weeks): Your lender requires the lease to have 5+ years of term (including options). The landlord's response window alone can be 15–30 days. Start at LOI, not at closing. Do not contact the landlord before your loan is approved — lenders prefer this sequence.

PPO CREDENTIALING (60–90 days, up to 120+ for some payers): You must get YOUR NPI credentialed with the practice's insurance plans. Many plans accept paperwork 30–60 days before your start date. Start the day the LOI is signed. Wait until closing and you'll own a practice you can't bill in-network for months.

ESCROW & CLOSING: A neutral escrow holds deposits, runs UCC lien searches (so you don't inherit the seller's debts), obtains tax clearances, and disburses funds. In California, bulk-sale notice rules add ~2.5 weeks of mandatory public notice before close. Closing week: sign loan docs, transfer DEA/radiology licenses, bind malpractice and liability insurance. Closing day: keys, alarm codes, passwords.

A dental practice acquisition requires four advisors. Try to skip any of them and you'll pay for it later.

DENTAL CPA: Not a general CPA — a CPA who works specifically with dental practices. They know the add-back categories, the SDE norms, and the tax implications of purchase price allocation (goodwill = ordinary income to the seller; equipment = depreciation to you). Hire yours before due diligence begins. They'll review the financials, build the add-back schedule, and structure the purchase to minimize your tax hit.

DENTAL ATTORNEY: A healthcare/dental transactional attorney, not a generalist. They draft or review the Asset Purchase Agreement (APA), negotiate employment and transition agreements, and protect you in the lease assignment. The APA is the binding document — the LOI is a warm-up. Budget $3,000–8,000 for a transaction attorney.

DENTAL LENDER: Apply to 2–3 dental-specific lenders — terms vary meaningfully. The major players: Provide, Bank of America Practice Solutions, Huntington Practice Finance, US Bank Practice Finance, Wells Fargo Practice Finance. Get pre-qualified before making offers; sellers take pre-qualified buyers far more seriously. See the Financing guide for details.

BROKER or BUYER ADVOCATE: A broker represents the seller; a buyer advocate (or buyer's broker) represents you. Many transactions use the seller's broker — which is fine, but know whose side they're on. Off-market deals often come through broker relationships, so having an advisor plugged into the network pays.

GET PRE-QUALIFIED FIRST: Pre-qualification is free, takes 24–48 hours, and tells you your purchase ceiling before you've wasted time touring practices out of reach.